The new Allianz barometer on the main threats to companies highlights the risks associated with Covid-19 at the top of the list. For the first time, IT incidents are classified as the main risk.
The health crisis has made it clear how risk management and business continuity need to evolve to help businesses cope with new events that could harm them. As the manufacturing fabric around the world tries to limit the consequences of Covid, it is necessary to prepare for the intensification of events such as a cloud outage or a cyber attack, natural disasters due to climate change or other epidemics.
The Allianz Risk Barometer 2021, the survey on global business risks by Allianz Global Corporate & Specialty (AGCS) based on the opinions of 2,769 experts (including CEOs, risk managers, brokers and insurance experts) from 92 countries, records three threats strongly linked to each other at the top of business risks: business interruption (mentioned by 41% of respondents), pandemic explosion (40%) and cyber incidents (40%).
Business Interruption: An Integrated Management of Business Risks Is Required
The interruption ( business interruption, BI ) back in first place among the concerns of businesses.
According to 59% of respondents, the main cause of BI in 2021 is the pandemic, followed by cyber incidents (named by 46% of the sample), natural disasters (for about 30%) and possible fires and explosions (for another 30%). The health crisis adds to the growing list of possible causes of business disruption that cause non-physical damage, such as computer or power blackouts. Consequences of the fight against the spread of the virus, pervasive digitization and remote working methods make companies and companies even more dependent on technologies, thus putting Business Continuity at risk. At the same time, we must continue to protect ourselves from traditional physical risks: in many industrial sectors, natural disasters,
In general all over the world, the sudden stop of economic activities, with loss of revenues, problems in production and supply chains, pushes companies to invest more in risk management. 62% of respondents are implementing a Business Continuity Plan, while 45% want to reorganize their supply chain.
In Europe, according to the “Covid-19 Survey Report 2020” produced by FERMA (the Federation of European Risk Management Associations), 46% of companies following the pandemic plan to make changes to the supply chains and 70% intend to find alternative suppliers. An Euler Hermes survey records an even greater number (62%) worldwide. 20% of these companies prefer to select suppliers within their country to reduce the risk on the supply chain in case of further blockages of the movements. Also according to Euler Hermes, 52% of companies have decided to resort to risk coverage through insurance solutions.
An integrated approach to risk management that takes into account all the important aspects for business continuity, from the assessment of threats to the selection of the best insurance coverage, allows to improve the resilience of a company on the market.
Cyber Risks on the Rise
The intensive use of digital technologies and smartworking intensify IT vulnerabilities, making cyber risks a very current threat and in third place in the Allianz 2021 ranking. Cyber risk is among the main threats in many countries including Brazil, France, Germany, India, Italy, Japan, South Africa, Spain, the United Kingdom and the United States. In April 2020, during the first lockdown, the FBI recorded a 300% increase in incidents alone, while cybercrime weighs on the global economy over $ 1 trillion, a 50% increase compared to 2018. Cybercriminals are able to quickly exploit new opportunities for intrusion into organizations’ information systems, and the recent wave of digitization has given further impetus to the attacks: ransomware, in particular, is increasingly harmful and also affects large companies through sophisticated methods and extortion requests.
The Pandemic Risk and Its Consequences
Fears related to the health crisis have moved from sixteenth to second place in the Allianz Barometer. The climb in the ranking is due to the fact that in 16 countries the pandemic is considered the main risk for individual and company safety.
Among the effects of Covid-19 it is to be emphasized the upheaval of the markets, the trend of which worries 19% of the sample investigated: this risk rises to fourth position, due to an exacerbation of the liquidity crisis. According to forecasts by Euler Hermes, most of the defaults will in fact come in 2021. The global insolvency index of the commercial credit insurance company is expected to reach a new record due to bankruptcies expected to rise by 35% in 2021, especially in major European countries, the United States, Brazil and China. According to the Allianz Report, accelerated digitalization will also make some operators and sectors disappear in favor of others.
Macroeconomic developments (in eighth place with 13% of responses), political risks and violence are also partly consequences of the pandemic
(tenths with 11%). The socio-economic fallout of Covid-19, combined with the recent Black Lives Matter protests, anti-lockdown demonstrations and unrest related to the US presidential elections, make 2021 a year particularly at risk of political and social unrest.
On the downside in the ranking of risks we find changes in legislation and regulation (fifth with 19%), natural disasters (sixth with 17%), fires / explosions (seventh with 16%) and climate change ( ninth with 13%), overshadowed by concerns about the health crisis.